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Gas prices on the rise in WNY

That sub-$2 gallon of gasoline didn't last long.

Gas prices, which dipped below $2 a gallon in mid-December, have jumped by 10 percent, or 20 cents per gallon, over the last month, reaching $2.06 per gallon, according to AAA.

Analysts blamed the jump on a combination of rising gasoline consumption and shrinking gasoline stocks, coupled with declining gasoline production by refiners. Those factors have created upward pricing pressure at the pump, even as crude oil prices have dropped back below $40 a barrel.

"We're not experiencing traditional pricing patterns," said Shawn Seufert, an AAA spokesman. "The industry is really struggling to find the balance between supply and demand," he said. "The correlation between the two has ceased to exist over the last three to four weeks."

Yet the jump in gas prices is far more complex than mere shifts in crude oil prices, said Michael Newman, executive vice president of Noco Energy Corp. "It's not a simple answer," he said. "There's a lot of stuff going on, a lot of crosscurrents."

These factors, for instance, are contributing to the recent jump in gas prices:

* Gasoline stocks are down 7 percent from a year ago, the U.S. Energy Information Administration said.

At the same time, people are starting to drive more. While consumers were keeping their cars in the garage more often when gas prices topped $4 a gallon last summer, they started taking them out for spins more frequently as prices dropped below $2.

Gasoline consumption during the week of Jan. 30 rose 4.2 percent, compared with the previous week, and was 1.1 percent more than the same time last year, the Energy Department reported. Overall, though, gasoline demand during January still was 2 percent lower than in January 2008, the agency said.

Prices also are being driven up as gasoline refiners, who were hit hard by the plunge in oil prices late last year, try to restore their battered profit margins, Newman said.

As crude oil prices plummeted, some refiners in December were forced to absorb losses as they filled contracts to supply gasoline for less than the cost of the crude oil they were purchasing, according to a report from the Energy Information Administration.

That trend was reversed in January, as refiners produced less gasoline, putting further upward pressure on prices, the agency said.

"The refiners have started to put margins back into their gasoline business," Newman said.

But there also are powerful factors that are keeping a lid on gasoline prices.

Crude oil prices remain low, tumbling by $2.01 to settle at $37.55 a barrel Tuesday.

Crude prices have fallen from record highs near $150 a barrel over the summer, as the shrinking economy has cost millions of Americans their jobs and caused manufacturers to cut production severely.

The Energy Information Administration, in its short-term energy outlook released Tuesday, said the worsening global economy and weak consumption mean there is plenty of oil on the market, despite recent OPEC production cuts.

That could put downward pressure on gas prices, although changes in pump prices typically lag behind shifts in crude oil prices by anywhere from a week to two months, the agency noted.

Newman isn't expecting gas prices to drop much. In fact, he thinks prices could jump back to the mid- to high-$2 range by this spring or summer if consumption keeps rising.

But the news at the pump isn't all bad. Gasoline still costs $1.20 less per gallon than the $3.26 consumers in the Buffalo Niagara region were paying at this time last year, said AAA.

e-mail: drobinson@buffnews.com

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